JOHN F. FLOYD: Union leadership failed Hostess Brands employees

Friday

Nov 30, 2012 at 7:10 PMNov 30, 2012 at 7:12 PM

One could call this an American tragedy. There have been worse occurrences, but the bankruptcy and eventual closure of Hostess Brands seems monumental in nature. It could mean the death of American bakery icons Twinkies and Wonder Bread. But the real tragedy is the loss of 18,500 jobs associated with the production of the Hostess Brands product.

By John F. FloydSpecial to The Times

One could call this an American tragedy. There have been worse occurrences, but the bankruptcy and eventual closure of Hostess Brands seems monumental in nature. It could mean the death of American bakery icons Twinkies and Wonder Bread. But the real tragedy is the loss of 18,500 jobs associated with the production of the Hostess Brands product. The closure of the company came about after one of the two unions representing associates — Bakery, Confectionary, Tobacco Workers and Grain Millers — voted to grant no concessions on wages and benefits and elected to withhold their labor and strike the company. The Teamsters, the other union, previously had voted to accept the concessions requested by the company. Two unions, two separate conclusions, two separate results, but both unions lost their jobs and livelihoods. A real American tragedy for both groups. The bakers’ union blames management and management blames the union, the classic response to most situations concerning a company’s difficulties. There is enough blame to go around, but the following is a brief analysis of the situation as it presently exists. Hostess Brands made more than 30 brands in 36 plants in the United States. The company has been in and out of bankruptcy several times since 2004.At the time of the initial bankruptcy, the company’s books should have been opened to the union. Then, in concert with the union, a plan should have been initiated to make the company solvent. This course would have necessitated the union trusting the company’s numbers. Maybe this happened, but I don’t know. A company has two major expenses, material costs and employee wages and benefits. Material costs basically are what the market determines and can only be controlled marginally by the company. Controllable costs are wages and benefits. When a company’s finances begin to turn negative, the initial reductions are made in manpower, which in turn reduces wages and benefits. In Hostess Brands’ case, with the union accepting no further reductions in wages and benefits, the company asked the bankruptcy judge’s permission to close. This request was granted, thus a loss of 18,500 jobs.Many Hostess Brands workers think the most popular brands will be bought by other bakers. This probably is the case, but the primary purchaser is Flowers Foods, headquartered in Thomasville, Ga. Flowers is a non-union company and will not be interested in re-hiring present Hostess employees as union workers. Flowers has open capacity and could move the most popular Hostess brands into its present manufacturing facilities. The Hostess Brands management group failed in its responsibility to assure a viable company. The union leadership failed the 18,500 workers of Hostess because they let the company close.Negotiations are two-way streets. Sometimes you win, sometimes you lose. There are times to fold up and times to hold up. The Hostess Brands financial situation was a time for the union to fold up to save the company and the associated jobs. Union leadership failed miserably by holding to the outdated notion of “not giving back what we have fought hard for.” Now the union has given back everything it achieved. A case in point of unions doing what was necessary to survive was the Chrysler and General Motors settlement and ultimate recovery from bankruptcy. The United Auto Workers agreed to wage and benefit reductions in order to save the company, and it worked. Chrysler and GM had help from the government, but the wage and benefit concessions were necessary ingredients of an overall settlement. The UAW acted responsibly and intelligently because it understood the alternatives. The bakers’ union leadership is directly responsible, and should be ashamed.This is the reality of unemployment former Hostess workers are facing. There are 12.3 million unemployed who will be competing for the same jobs as Hostess Brand employees. About 6 million have been unemployed for 27 weeks or longer, and 3.4 million have been unemployed 52 weeks or longer. Competition for any jobs will be furious.Based on the age of Hostess Brands, many of the employees will be in advanced years and unqualified for future employment that would yield past wage and benefit levels. The former employees will be lucky to get a minimum wage job with no benefits. Even with contract concessions, employment at Hostess Brands would be far more lucrative than the unemployment line or jobs available in today’s economic environment.All unions should make a case study of what happened at Hostess Brands, and vow to never again let stupidity get in the way of common sense.

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